Senate Bill 1520 was signed by Governor Rick Scott on June 16, 2017. The following is a summary of the bill, which will take effect on July 1, 2017:

SB 1520 amends 718.117, Florida Statutes, regarding the optional termination of condominiums, making it more difficult for a Plan of Termination to be passed without full consent of the unit owners. The changes to the law reduce the amount of unit owners required to reject a plan, postpone the time until another plan can be voted on, and requires that the plan be approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation (“Division”) based on factual and public policy reasons. Further, it guarantees that an optional termination will not result in a unit owner receiving less than his or her purchase price of the unit.

Changes to 718.117(1), (3) and addition of (21):

Applicability

The statute contains language indicating it is controlling over language in a condominium’s declaration and applies to all condominiums in the state in existence on or after July 1, 2007. The phrase: “Unless the declaration provides for a lower percentage” has been stricken indicating that the threshold established in the statute is the minimum vote required for optional termination.

Optional Termination

Prior to the effective date of the amendment, in order to approve a plan of termination, 80% of unit owners must approve the plan, and no more than 10% of unit owners can object. The changes to the statute now require an 80% unit owner vote approving a plan of termination; with less than 5% objecting. Additionally, the changes to the statute now provide that once the plan of termination passes a unit owner vote, it would then need to be approved by the Division.

The Division will have 45 days to review the Plan of Termination and notify the association of any deficiencies, or if it is rejected. If the Division does not respond within 45 days, the plan is deemed accepted. Under the new law, plans of termination will now need to include factual circumstances that show that the plan complies with Section 718.117, Florida Statutes, and supports the public policies of the section, which are listed below.

If a plan of termination is rejected by 5% or more of the total voting interests of the condominium, then a new plan may not be considered for 24 months, as opposed to the current period of 18 months.

Under the current law, a condominium owner who purchased a unit from the developer must be made “whole” upon termination. In other words, the plan of termination could not provide for paying the unit owner less than the original purchase price. SB 1520 removes the language that restricts this requirement only to the original unit owner, meaning that an owner who purchased a resale condominium would also be entitled to receive a minimum of the purchase price upon optional termination. The bill applies this section to all unit owners, not just the ones who object to the plan.

Public Policy Reasons the DBPR Evaluates During Review for Optional Termination

Ensure continued maintenance, management, and repair of stormwater management systems, conservation areas, and conservation easements; or avoiding the costs and responsibilities of maintenance, management, and repair from falling on the shoulders of the taxpayers.

Prevent covenants from impairing the continued productive use of the property.

Protect state residents from health and safety hazards.

Provide fair treatment and just compensation for individuals, and preserve property values.

Protect homestead property and homestead property rights.

For a complete reading of the adopted legislation, please refer to the text of the bills available on the websites for the Florida Senate (www.flsenate.gov) and Florida House of Representatives (www.myfloridahouse.gov).

The firm’s Oscar R. Rivera wrote an article that appeared today in the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which was titled “Best Practices for Buyouts of Unit Owners at Older Condos,” discusses recent changes in the Florida condominium termination law and important considerations for developers in these property acquisitions. Oscar’s article reads:

In the last several weeks we learned of a building in Surfside where the developer successfully bought out all of the units from their owners and another in the Brickell area where the developer purchased 60 of the 61 residences from their owners and is now using the statutory condo termination process to acquire the remaining unit and commence its development plans.

During last year’s legislative session, Florida lawmakers made changes to the condominium termination statute that made the process considerably fairer for unit owners. Now owners who are current on their mortgages and association fees must get fair market value, and their entire first-mortgage debt must be satisfied even if it exceeds the current fair market value.

In addition, for the original owners who maintain it as their homestead property, they must be offered their original purchase price regardless of whether it exceeds the current fair market value. The changes also enable some owners to rent their units for a year before moving out and receive a 1 percent relocation fee.

In light of these changes and in an effort to avoid any delays and additional costs due to holdout owners and related litigation, it greatly behooves developers in these buyouts to carefully assess and determine the valuation of the property in order to make very fair and enticing offers to the unit owners.

Keep in mind that the price that is offered to every owner will be based on the same exact price per square foot for every residence in the building, so the square-foot price must be high enough to entice even the owners of the most lavish units with the best views.

His article concludes:

The most effective approach is for the developer to work very closely with the association’s board of directors in order to get all of the pertinent information into the hands of every owner at the property. Meetings with the owners to answer all of their questions and allay any of their concerns are also a priority.

The contracts that are presented to all of the owners will be identical, except of course for their corresponding unit number, owner’s name and purchase price based on the square footage. There are no financing contingencies or property inspections required, but they do include contingency clauses indicating the required critical mass of units that must accept in order for the offers to be valid. They also include extension clauses to enable the developer to extend the deadline in case of litigation or other delays due to some of the logistics of the condo termination process.

In many cases, the only negotiations that take place with some of the individual owners involve their requests to remain in their residences and pay rent to the developer for a number of months after the closing. Developers should remain flexible in accommodating these requests, as typically they will not be able to begin the teardown of the property for months after the closings while other aspects of the condo termination and development processes are underway.

The firm’s Oscar Rivera played an important role in the International Council of Shopping Centers’ recent “Strategic Leadership Summit and Federal Fly-In” in Washington D.C. The following is an excerpt from an article on this initiative from the April issue of ICSC’s “Shopping Centers Today” newsletter:

Roughly 120 retail and real estate professionals converged on Washington, D.C., on March 24 and 25 to discuss e-fairness, tax reform and similar issues directly with lawmakers during the ICSC Strategic Leadership Summit and Federal Fly-In. “With all of the electronic means of communication, sitting face-to-face with another person is still the best way to convey your position,” said Brad M. Hutensky, principal and president of Hartford, Conn.-based Hutensky Capital Partners, and also an ICSC trustee and a past chairman. “So given the opportunity to meet with these congressmen and senators, we can explain from the perspective of an industry professional our perspective on these issues. That can have a great impact.”

The delegates divided up by state of residence to meet with their various House and Senate representatives or with Congressional staff. In some 220 meetings, they told lawmakers how the issues at hand affect their businesses. “It is amazing how large an impact an ICSC member can have on helping an elected official understand the impact that government can have on the shopping center business,” Hutensky said. “You’re talking about someone who is a practitioner and in some cases a constituent or someone who owns property in that person’s district. They can really talk about the impact that laws and potential laws would have on their business, and the people that shop in their shopping centers. We talked with one congressman and likely changed his view on marketplace e-fairness in one 30-minute meeting.”

. . . ICSC’s talking points for the 114th Congress included requiring online-only retailers to collect sales tax, to level the playing field with brick-and-mortar stores, tax reform, reform for the Americans with Disabilities Act, and a proposal to improve transparency and cost-effectiveness regarding energy-efficiency in building codes.

For the last several years, the state legislature has considered the possibility of rolling back Florida’s tax on commercial real estate lease payments, and the issue is back on the legislative agenda for 2015 with the introduction of a bill last week in the Florida Senate. I was very pleased to have had the opportunity to participate in last week’s International Council of Shopping Centers Florida Legislative Conference in Tallahassee, and our meetings with the lawmakers and their representatives proved to be very productive in persuading them to keep this measure in mind.

Because Florida is the only state that imposes a sales tax on the sums that businesses pay to rent commercial space, this tax has a negative effect on the efforts of economic development councils and government to attract major employers and promote the growth of industries in the state. For the retail industry in Florida, this tax has been particularly onerous. The industry is struggling to compete with online retailers, and the tax makes it especially difficult because most of the online sellers have their facilities in states that do not impose such a tax.

As Gov. Scott has noted in previous years, the sales tax on commercial rent costs Florida businesses $1.4 billion per year. Its reduction “will make it more affordable for businesses to lease space, so they can keep more of the money they earn and create more jobs,” said Gov. Scott. “Florida is the only state that imposes this tax, and we must keep working to make Florida the best place in the world to start and grow a business.”

Our firm’s other real estate attorneys and I are pleased that this issue is once again being considered by the Florida legislature, and we will monitor its progress during this year’s session and post a final update on its outcome in the coming months. We write regularly in this blog about important legal and business issues for the commercial and residential real estate industries in Florida, and we encourage industry followers to enter their email address in the subscription box at the top right of the blog in order to automatically receive all of our future articles.